Exhibit 10.25
OPTION AGREEMENT
(WITH ASSET PURCHASE SUPPLEMENT)
BETWEEN
DIRECT GENERAL INSURANCE AGENCY, INC.,
A TEXAS CORPORATION
(REFERRED TO HEREIN AS "PURCHASER")
AND
ALL AMERICAN GENERAL AGENCY, INC.
A TEXAS CORPORATION,
GUARANTEED INSURANCE AGENCY, INC.
A TEXAS CORPORATION
(COLLECTIVELY REFERRED TO HEREIN AS "SELLERS")
AMCO RETAIL, LLC,
A FLORIDA CORPORATION,
AMCORP GENERAL AGENCY, INC.
A TEXAS CORPORATION,
PC GENERAL AGENCY, INC.
A GEORGIA CORPORATION,
XXXX X. XXXXXX, INDIVIDUAL
A GEORGIA RESIDENT,
XXXXX XXXXX, INDIVIDUAL
A TEXAS RESIDENT,
XXXXXXX XXXX, INDIVIDUAL
A GEORGIA RESIDENT,
(COLLECTIVELY REFERRED TO HEREIN AS "GUARANTORS")
--------------------------------
JANUARY 1, 2003
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CONTENTS
SECTION SECTION HEADINGS PAGE NO.
------- ---------------- --------
Recitals.....................................................1
1. Purchase Option..............................................2
2. Purchase Price...............................................2
3. Purchase Date and Exercise Date..............................3
4. Transferred Assets...........................................3
5. Obligation to Sell Transferred Assets........................4
6. Conduct of Sellers...........................................4
7. Prohibited Transactions......................................4
8. Access to Financial and Other Information....................5
9. Termination..................................................6
10. Schedule A...................................................7
11. Non-Compete..................................................7
12. Board Approvals..............................................7
13. Miscellaneous Provisions.....................................8
a. Modification.................................................8
b. Notices......................................................8
c. Assignment...................................................9
d. Governing Law................................................9
e. Severability................................................10
f. Counterparts................................................10
g. Headings....................................................10
h. Entire Agreement............................................10
i. Confidentiality.............................................10
Signatures..................................................13
Schedule A: List of Names and Addresses of the Stores
Supplement: Asset Purchase Supplement, providing additional
terms and provisions and will govern the
consummation of the purchase and sale of assets
upon Purchaser's exercise of the Option (the
Supplement contains its own Contents page.)
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OPTION AGREEMENT
THIS OPTION AGREEMENT, including all schedules, supplements, and
exhibits (referred to herein collectively as this "Agreement") is dated as of
January 1, 2003 between Direct General Insurance Agency, Inc. ("Purchaser"), a
Texas domiciled Managing General Agent; and All American General Agency, Inc., a
Texas corporation; Guaranteed Insurance Agency, Inc., a Texas corporation
(referred to herein collectively as the "Sellers"); and AMCO Retail, LLC, a
Florida corporation; AMCORP General Agency, Inc., a Texas corporation; PC
General Agency, Inc., a Georgia corporation; Xxxx X. Xxxxxx, Individual, a
Georgia Resident; Xxxxx Xxxxx, Individual, a Texas Resident; Xxxxxxx Xxxx,
Individual, a Georgia Resident (referred to herein collectively as the
"Guarantors").
WITNESSETH:
WHEREAS, Purchaser has entered into a Managing General Agency
Agreement, Number Direct 03-001 dated January 1, 2003, between Purchaser and Old
American County Mutual Fire Insurance Company, for the purpose of offering a
non-standard personal automobile insurance program in the state of Texas,
hereinafter referred to as the "Program"; and,
WHEREAS, Purchaser and All American General Agency, Inc., a Texas
corporation, (referred to herein as "Agent") have entered into a Sub-producer
agreement of even date herewith (the "Sub-producer Agreement"), pursuant to
which Agent, will sell automobile insurance policies and perform certain other
Sub-producer functions on behalf of Purchaser in accordance with the terms of
the Sub-producer Agreement under the Program; and,
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WHEREAS, in connection with said Sub-producer Agreement Sellers desire
to grant to Purchaser an exclusive irrevocable option to purchase all of the
insurance agency related assets of the Sellers, including, all business on the
books of the Agent at the time of consummation of such purchase; and
WHEREAS, Sellers and Purchaser desire to set forth in this Agreement
the terms of said option, including detailed provisions that will govern the
transfer of such assets upon the consummation of Purchaser's exercise of the
option granted under this Agreement; and
WHEREAS, the Guarantors are willing to guarantee the performance of the
Sellers under this Agreement and the related Asset Purchase Supplement;
NOW THEREFORE, in partial consideration of the commission rate and
other terms of the Sub-producer Agreement, and in further consideration of the
mutual promises set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties,
Purchaser and Sellers, intending to be legally bound, hereby agree as follows:
1. Purchase Option. Sellers irrevocably grant to Purchaser the exclusive
right to purchase (the "Option") the Transferred Assets (defined
below), which Sellers use to conduct their automobile insurance sales
and service business throughout the State of Texas, under the Program
for the Purchase Price (defined below), said Option being exercisable
by Purchaser in accordance with this Agreement.
2. Purchase Price. If Purchaser elects to exercise the Option granted
hereunder, the aggregate purchase price payable to Sellers (allocation
among Sellers to be determined by Sellers) for
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the Transferred Assets shall be an amount of cash equal to: 1) twelve
percent (12%) of the aggregate net collected private passenger
automobile written premium (net of cancellations) produced by Sellers
under the Program, and 2) four percent (4%) of net collected
non-standard private passenger automobile written premium (net of
cancellations) produced by Sellers for other Texas programs. Net
collected premium shall include one-half (1/2) of the collected policy
fee, up to $15. Any policy fee above $15 shall be included in net
collected premium in full. For the purpose of the Purchase Price
calculation, the net collected non-standard automobile insurance
premium shall be calculated by multiplying the net collected.
non-standard private passenger automobile written premium (net of
cancellations) from July 1, 2004 to December 31, 2004 by two (2).
Additionally, for the purpose of the Purchase Price calculation, net
collected non-standard automobile insurance premiums written under the
Program and for other programs will only include premium produced by
the Sellers.
3. Purchase Date and Exercise Date. If the Option granted by this
Agreement is exercised as provided hereunder, then the purchase of the
Transferred Assets shall be effected on December 31, 2004 (the
"Purchase Date"). Purchaser may exercise the Option by delivering
written notice to Sellers (the "Notice") at any time on or before sixty
(60) days prior to the Purchase Date (the "Exercise Date"), in
accordance with the notice provision of this Agreement.
4. Transferred Assets. The assets that Purchaser may acquire by exercising
the Option shall consist of the "Transferred Assets" as such term is
defined in Section 1.1 of the Asset Purchase Supplement (the
"Supplement") attached hereto, and incorporated by reference herein and
made an integral part of this Agreement.
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5. Obligation to Sell Transferred Assets. The parties expressly intend
that the obligation of Sellers to sell the Transferred Assets to
Purchaser becomes final and enforceable upon the execution and delivery
of this Agreement, subject only to (i) the exercise of the Option by
Purchaser, (ii) the termination of this Agreement as provided herein,
and (iii) such conditions or contingencies that are expressly provided
in this Agreement or the Supplement.
6. Conduct of Sellers. Before the expiration of the Option, except as
permitted by the prior written consent of Purchaser, but without
creating any liability, commitment, or obligation of Purchaser, Sellers
shall comply with Section 5.2 "Conduct Before Closing Date" of the
Supplement.
7. Prohibited Transactions.
a. Exclusivity. Before the expiration of the Option, except as
permitted by the prior written consent of Purchaser, but
without creating any liability, commitment, or obligation of
Purchaser, Sellers shall not directly or indirectly, in any
way, contact, initiate, enter into, or conduct any discussions
or negotiations, or enter into any agreements, whether written
or oral, with any person or entity with respect to the sale of
any of the Transferred Assets or the capital stock of Sellers
or a merger or consolidation of Sellers with any other entity.
This paragraph shall not limit the Sellers' ability to sell
immaterial amounts of assets in the ordinary course of
business.
b. Long-Term Contracts. During the term of this Agreement,
without the written consent of Purchaser, Sellers will not
enter into or renew any facility or equipment lease agreement
for a term greater than two (2) years. During the second year
of this Agreement, Sellers will not enter into or renew any
form of advertising contract, or any
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other agreement that could materially affect the Transferred
Assets (other than facility or equipment leases), if such
contract or agreement has a term greater than one year.
c. Third Party Producer Agreements. During the term of this
Agreement, without the written consent of Purchaser, Sellers
will not enter into or renew any sales, producer, or agent
agreement with any agency, managing general agent, insurer,
broker, or other entity, pursuant to which Sellers would not
obtain exclusive rights to all renewals and the exclusive
control of renewal solicitations for all business written by
or through such Stores under such agreement, other than as
required by Texas statute.
d. Control of Sellers. Notwithstanding anything in this Agreement
to the contrary, the parties acknowledge that until Purchaser
exercises the Option and the closing for the asset purchase
transaction has been consummated on the Purchase Date, the
responsibility for conducting the business affairs of the
Sellers shall remain exclusively with the current management
of Sellers.
8. Access to Financial and Other Information.
a. So long as the Option has not expired and this Agreement has
not been terminated, Sellers shall provide on a confidential
basis financial, premium volume and such other information
about the Stores, the Business (as defined in the Supplement),
and the Transferred Assets, as Purchaser may reasonably
request. Sellers will promptly advise Purchaser of and provide
detailed information with respect to, any formal or informal
audit or examination of and any administrative action taken
against, any of the Sellers, by the Texas Department of
Insurance or any other regulatory agency. Purchaser shall
maintain any such information in confidence and shall use it
only for the purposes contemplated within this Agreement.
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b. Within thirty (30) days from the Effective Date of this
Agreement, Sellers shall provide, or cause to be provided, to
Purchaser the following Schedules required by the Supplement,
completed as of the Effective Date: Schedules 1.1(a); 1.1(b);
1.1(e); 1.1(f); 1.1(g); 3.11; and 3.14. Thereafter, during the
term of this Agreement, Sellers shall update, or cause to be
updated, such Schedules to be complete and accurate as of
each December 31st and deliver to Purchaser by the following
February 1st. If Purchaser exercises the Option by delivering
the Notice, then Sellers shall update, or cause to be updated,
such Schedules to be complete and accurate as of the Purchase
Date and deliver the revised Schedules to Purchaser no fewer
than five (5) business days prior to the Purchase Date. Any
changes to the original Schedules shall be clearly indicated
on the revised Schedules.
9. Termination. Purchaser may terminate this Agreement at any time and for
any reason before Purchaser delivers the Notice. This Agreement shall
terminate and the Option shall expire at 11:59 p.m., Nashville,
Tennessee time, on the Exercise Date, unless prior to such date and
time Purchaser has exercised the Option by delivering the Notice to
Xxxx Xxxxxx with copy to Burnie Burner on behalf of Sellers.
Termination of this Agreement shall have no effect on the Sub-producer
Agreement, the termination of which shall be governed by its own terms;
provided, however, that this Agreement shall terminate automatically
and the Option shall simultaneously expire if Direct General Insurance
Agency, Inc. terminates the Sub-producer Agreement in accordance with
the terms of the Sub-producer Agreement; provided further that if the
duration of the Sub-producer Agreement is extended thereunder, then the
duration of this Agreement and the Option shall be likewise extended.
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10. Schedule A. Sellers and Guarantors represent that Schedule A to this
Agreement is a list of the names and addresses of all of the Stores
through which Sellers conduct their automobile insurance sales and
service business throughout the State of Texas. Sellers and Guarantors
represent that the Company Stores identified on Schedule A are wholly
owned by Guaranteed Insurance Agency, Inc., and that all of the
Transferred Assets as defined in the Supplement are owned, leased, or
otherwise under the control of Sellers.
11. Non-Compete. If the Option is exercised, no Sellers or Guarantors shall
open or acquire, directly or indirectly, any non-standard automobile
insurance agency in the State of Texas for a period of eighteen (18)
months after such Option is exercised in accordance with the
Supplement.
12. Board Approvals.
a. Within 30 days of execution of this Agreement, Purchaser shall
have delivered to Sellers a certified copy of resolutions of
the board of directors of Purchaser confirming authorization
for Purchaser to enter into this Agreement (including the
Supplement hereto) and to consummate the transactions
contemplated by this Agreement and said Supplement, subject
only to the conditions set forth herein and therein and to any
additional conditions, acceptable to Sellers, expressly set
forth in such resolutions.
b. Within 30 days of execution of this Agreement, Sellers shall
have delivered to Purchaser certified copies of resolutions of
the board of directors of each Seller individually, and to the
extent the Transferred Assets will represent all or
substantially all of the assets of any Seller, certified
copies of resolutions of the shareholder(s) of any such
Sellers, granting final authorization for the Sellers to enter
into this Agreement (including the Supplement hereto) and to
consummate the transactions contemplated by
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this Agreement and said Supplement, subject only to the
conditions set forth herein and therein and to any additional
conditions, acceptable to Purchaser, expressly set forth in
such resolutions.
13. Miscellaneous Provisions.
a. Modification. This Agreement may not be amended or modified in
any way except by a written document signed by the parties who
are affected by such amendment or modification.
b. Notices. The Notice and all other notices, requests, demands,
and other communications required or permitted hereunder shall
be in writing and shall be deemed to have been given (i) when
sent by facsimile with confirmation; (ii) when received from
an overnight courier or by other method of hand delivery; or
(iii) on the third business day after being mailed certified
or registered U.S. mail with postage prepaid as follows:
(1) If to Purchaser to:
Direct General Insurance Agency, Inc. (Texas)
Executive Offices
0000 Xxxxxxxx Xxxx Xxxxx, Xxxxxxxx X
Xxxxxxx, XX 00000
ATTENTION: Xxxxxxxxxx X. Xxxxx, President
Direct General Insurance Agency, Inc. (Texas)
Regional Administrative Xxxxxx
0000 Xxxxxxxxxxxx Xxxx, Xxxxx 0-00
Xxxxxxxxx, XX 00000
FAX: (000)000-0000
ATTENTION: Xxxxxx X. Xxxxxx, Secretary
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(2) If to Sellers, to:
All American General Agency, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
ATTENTION: Xxxx X. Xxxxxx, President
Long, Burner, Parks & XxXxxxx, P.C.
000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
ATTENTION: Burnie Burner
----------------------------------------------------------
c. Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective
successors, and permitted assigns, but neither this Agreement
nor any of the rights, interest, or obligations hereunder
shall be assigned by either of the parties hereto without the
prior written consent of the other party; provided, however,
that Purchaser may assign all or a portion of its rights,
interest, or obligations hereunder to any affiliate that now
or hereafter controls, is controlled by, or under common
control with, Direct General Corporation; provided, however,
that any such assignment by Purchaser shall not relieve
Purchaser of its liabilities to Sellers under this Agreement.
(For this paragraph, Sellers are deemed to be one "party.")
d. Governing Law. This Agreement and the legal relations between
the parties hereto shall be governed by, and construed in
accordance with, the laws of the State of Texas, without
reference to the conflict of laws principles thereof.
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e. Severability. In the event any part(s) of this Agreement
should be adjudged invalid or unenforceable, such adjudication
shall in no manner affect the other parts, which shall remain
in full force and effect as if the part(s) so declared or
adjudged invalid were not originally a part hereof.
f. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument. This Agreement will be deemed binding and
in effect if counterparts are signed by the parties and
delivered by facsimile, provided that the parties exchange
originally signed counterparts by U.S. Mail or overnight
courier.
g. Headings. The headings contained in this Agreement are
inserted for convenience only and shall not constitute a part
hereof.
h. Entire Agreement. This Agreement, including any schedules,
supplements, exhibits and other documents referred to herein,
including, without limitation, the Sub-producer Agreement,
the, and the Supplement, embodies the entire agreement and
understanding of the parties hereto with respect to the
subject matter contained herein and supersedes all prior
agreements and understandings between the parties with respect
to such subject matter, including, by way of illustration and
not by limitation, any term sheet or letter of intent
previously agreed to by the parties.
i. Confidentiality. In connection with this Agreement, and until
the Option expires or is exercised hereunder, each party has
provided, and intends to provide to the other, information
about their respective business affairs, financial condition,
computer information systems, corporate and management
structure, and other confidential and proprietary information
("Information"). The term "Information" shall include any
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form of communication between the parties, including without
limitation, written documents, software programs,
electronically stored data, and oral presentations and
discussions. The term "Information" includes this Agreement,
its contents, and the fact tat this Agreement has been entered
into between the parties.
Each party will keep the Information provided by the other
party in confidence and will not use such Information for any
purpose other than as contemplated by this Agreement. Each
party will not copy the Information provided by the other
party, or disclose or allow disclosure of such Information to
any other person, except that each party may disclose such
Information to its officers, directors, employees, independent
contractors, affiliates, or independent auditors
("Representatives") and applicable regulatory authorities
(upon the request of such authorities), who have a need to
know the Information for the purpose of implementing this
Agreement or auditing or regulating the affected party.
Furthermore, Purchaser, or any affiliate of Purchaser, may
disclose in any prospectus or offering memorandum the
existence of this Agreement and its material terms in the
context of any offering of securities by Purchaser or its
affiliate, if Purchaser is advised by legal counsel that such
disclosure is required or prudent in connection with such
offering.
The term "Information" shall not include any information:
(i) which at the time disclosed to or obtained by either
party is available generally to the public;
(ii) which becomes available generally to the public
through no act or omission by either party in
violation of this provision;
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(iii) which either party demonstrates was received by it
from a third party, who had no confidentiality
obligations to the other party with respect thereto;
(iv) which is required, under advice of counsel, to be
disclosed by law or court order, or in connection
with litigation or arbitration brought by either
party to enforce this Agreement; or
(v) following the lapse of one year from the Exercise
Date or from the date this Agreement is terminated as
provided hereunder; provided that the prohibition
against disclosing the Purchase Price shall not
lapse.
Upon the execution of this Agreement, at the request of
Sellers or Purchaser, the parties may, individually or
jointly, issue a press release describing the Option and any
related transactions. The language of any such press
release(s) shall be mutually agreed between the parties. After
such initial press release(s), except as and to the extent
required by law or regulation, as advised by counsel, without
the prior written consent of the other party, neither
Purchaser, nor Sellers will, and they will direct their
Representatives not to make, directly or indirectly, any
public comment, statement or communication with respect to, or
otherwise to disclose or to permit the disclosure of the
existence of the Option or any of the terms, conditions or
other provisions of this Agreement; other than to repeat the
information disclosed in the foregoing initial press
release(s).
REMAINDER OF PAGE LEFT BLANK
SEPARATE SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date first above written.
"PURCHASER"
DIRECT GENERAL INSURANCE
AGENCY, INC., a Texas corporation
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
---------------------------------
Title: SVP & CFO
---------------------------------
"SELLERS":
All American General Agency, Inc.
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
Guaranteed Insurance Agency, Inc.
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Name: Xxxxx X. Xxxxx
Title: President
"GUARANTORS":
AMCO Retail, LLC
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Name: Xxxxx X. Xxxxx
Title: Director
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AMCORP General Agency, Inc.
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
PC General Agency, Inc.
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: President
/s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx, Individually
/s/ Xxxxx Xxxxx
-------------------------------
Xxxxx Xxxxx, Individually
/s/ Xxxxxxx Xxxx
-------------------------------
Xxxxxxx Xxxx, Individually
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